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FX Blog- GVI Forex Month Ahead Interest Rate Outlook for May 4, 2009
Central Bank Policy Outlook -- Key Interest Rates
Global Interest Rates
The Global-View.com Monetary Policy Outlook is prepared weekly by the trading professionals at GVI Forex. For information on the GVI Forex Service Click Here
4 May 2009
Upcoming Central Bank Meetings -- Monetary Profiles Market expects a -25bp cut in the 3.25% Cash rate target.
Reserve Bank of Australia- Tuesday May 5, 2009
Australia unlikely to eventually move to an effective zero interest rate policy (ZIRP).
RBA has been very aggressive recently on interest rate cuts.
Economy hit by slowing global demand.
Inflation not an issue.
European Central Bank- Thursday May 7, 2009
Market expects a -25bps cut in the 1.25% refi rate.
ECB has renamed QE as ´┐Żunconventional measures´┐Ż.
Bank of England- Thursday May 7, 2009
Market expects a -25bp cut in the 0.50% repo rate.
The Bank of England could eventually move to an effective zero interest rate policy (ZIRP). QE is now effectively in place.
The BOE has become very aggressive recently on monetary ease after dragging its feet easy on.
Keep an eye on the BOE vs. ECB rate spread. The GBP is more comfortable with a positive spread vs. the EUR.
Inflation not issue; economy very slow.
GVI Reserve Bank of Australia Policy Meeting Preview
- Decision Anouncement: May 5, 2009 at 03:30 GMT.
- RBA Cash Rate Target: 3.00%
- Expected Decision: -50bp rate cut
- The pace of Reserve Bank ease has been slowing, but the economy remains vulnerable.
RESERVE BANK OF AUSTRALIA Policy Objective: The policy objective is a target for consumer price inflation, of 2-3 per cent per annum. Monetary policy aims to achieve this over the medium term and, subject to that, to encourage the strong and sustainable growth in the economy. Controlling inflation preserves the value of money. In the long run, this is the principal way in which monetary policy can help to form a sound basis for long-term growth in the economy.
The chart above shows year/year and the CPI target of 2% to 3% for this price index.┬á
The chart above shows the current three month bank bill rate, the current Cash Rate target┬á and where the futures markets are currently trading three month rates for the specified periods in the future. The chart also includes comparisons of where these futures rates were trading most recently, a week ago and four weeks ago.┬á The chart provides a view on where the markets feel Australian interest rates are headed.
The chart above shows the Australian overnight rate target, three month bank bills, and two- and ten-year bond yields over the past twelve months.
GVI European Central Bank Policy Meeting Preview
- Decision: May 7, 2009 at 12:45 GMT.
- ECB Refi rate: 1.25%
- Expected Decision: -25bps
- Belatedly policy has finally started to focus on economic growth and financial stability. Its past obsession with inflation is broadly being seen as having been in error.
ECB Policy Objective: The primary objective of the ECB's monetary policy is to maintain price stability. The ECB aims at inflation rates of below, but close to, 2% over the medium term.
The chart above shows year/year HICP (Harmonized CPI) for the Eurozone relatrive to its "below 2%" target level.
The chart above shows the current three month libor rate, the current ECB┬á "refi" rate target┬á and where the futures markets are currently trading three month rates for the specified periods in the future. The chart also includes comparisons of where these futures rates were trading most recently, a week ago and four weeks ago.┬á The chart provides a view on where the markets feel Eurozone interest rates are headed.
The chart above shows the ECB refi rate target, three month libor, and two- and ten-year bond yields over the past twelve months.
GVI Bank of England Policy Meeting Preview
- Decision: May 7, 2009 at 12:00 GMT.
- BOE Repo Rate: 0.50%
- Expected Decision: -25bp rate cut.
- Risks that the economy has been falling off a cliff has underscored the need for aggressive easing actions.Quantitative ease is now underway.
- Quantitative Eaing (QE) at hand.
BANK OF ENGLAND Policy Objective: The Bank's monetary policy objective is to deliver price stability, low inflation, and, subject to that, to support the Government's economic objectives including those for growth and employment. Price stability is defined by the Government's inflation target of 2%.
The chart above shows year/year CPI for the U.K. relative to its 2% target for this key price index.┬á
The chart above shows the current three month libor rate, the current Repo Rate┬á and where the futures markets are currently trading three month rates for the specified periods in the future. The chart also includes comparisons of where these futures rates were trading most recently, a week ago and four weeks ago.┬á The chart provides a view on where the markets feel U.K. interest rates are headed.
The chart above shows the U.K. repo rate target, three month libor, and two- and ten-year bond yields over the past twelve months.
John M. Bland is an author and co-founder and partner of Global-View.com. Prior to Global-View.com, he was a Vice-President and senior dealer in a forex inter-bank and futures trading arm of a subsidiary (ContiCurrency) of the Continental Grain Company in NYC. Previous to that, he was one of the early members of the Chemical Bank corporate advisory service in NYC, and also worked in international liability management for that bank. John holds an MBA from the Hass School at the University of California at Berkeley and a bachelors degree in International Economics from Berkeley.
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